Since Forbes hired me in 1995 to write a legal column, I’ve taken advantage of the great freedom the magazine grants its staff, to pursue stories about everything from books to billionaires. I’ve chased South Africa’s first black billionaire through a Cape Town shopping mall while admirers flocked around him, climbed inside the hidden chamber in the home of an antiquarian arms and armor dealer atop San Francisco’s Telegraph Hill, and sipped Chateau Latour with one of Picasso’s grandsons in the Venice art museum of French tycoon François Pinault. I’ve edited the magazine’s Lifestyle section and opinion pieces by the likes of John Bogle and Gordon Bethune. As deputy leadership editor, these days I mostly write about careers and corporate social responsibility. I got my job at Forbes through a brilliant libertarian economist, Susan Lee, whom I used to put on television at MacNeil/Lehrer NewsHour. Before that I covered law and lawyers for journalistic stickler, harsh taskmaster and the best teacher a young reporter could have had, Steven Brill.

Why Should Hostess Executives Get The Bonuses They're Demanding?

The latest news from the bankruptcy front at iconic Twinkies maker Hostess Brands: AP is reporting that the Irving, Texas company is planning to ask a bankruptcy judge to grant approval of bonuses totaling up to $1.8 million for its executives. Hostess says the incentive pay is necessary to assure that the 19 managers in charge of the liquidation process remain on board until the wind-down is complete. Hostess wants to make two of those executives eligible for additional financial rewards, depending on how efficiently they carry out the liquidation.

Meantime, Hostess is waiting for final approval for its liquidation, which was approved on an interim basis by bankruptcy judge Robert Drain last week. The wind-down process reportedly includes the sale of Hostess’ 37 plants and its many brands, including Ding Dongs, Ho Hos and Wonder Bread.

It’s tough to see why managers should get bonuses for driving a company into the ground and sacrificing some 18,000 jobs. Hostess had become horribly insolvent, with a net loss of $1.1 billion in fiscal 2012 on revenues of $2.5 billion. The company also reportedly has $111 million in unfunded pension obligations.

As Forbes contributor Adam Hartung reported here, Hostess failed to reinvent its junk food product line and make it more enticing to health-conscious palates. It also allowed private equity firm Ripplewood Holdings to load up the company with debt when it took Hostess out of bankruptcy in 2009. Two hedge funds, Silver Point and Monarch, control hundreds of millions of dollars of Hostess’ debt. The combination of an undesirable product line, massive debt hangover and unions that wanted the company to make good on its promises, ultimately killed the company.

The good news is that Hostess’s brands have reportedly generated serious interest from more than 80 potential bidders, according to the Dallas Morning News. The company is looking to sell well-known names through something called a “363 sale,” which would allow assets to be sold free of liabilities. Consultants at the company have reportedly said that Hostess’ assets could bring in $1 billion.

Given the surplus of potential bidders and the support for the sale thus far from major lenders Silver Point and Monarch, it’s tough to see why Hostess managers need to receive any extra compensation.

What about the union members who are losing their jobs? As my colleague Daniel Fisher has reported, there is some hope that workers will get re-hired by companies that buy Hostess’ assets. It’s even possible that union members will be able to stick together and bargain for wages at the new entities. In other words, the unions won’t necessarily be broken by the Hostess liquidation.

That’s good news for workers. It’s also possible that managers could get job offers from purchasers. But they don’t deserve extra pay to oversee a liquidation that is at least in part a result of their own mistakes.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.

Comments

These executives should **** on the end of a stick. They destroyed the company, drove it into the ground through their incompetence and hubris. They’re lucky they can walk away without being sued by the shareholders.

If you think Roger`s story is shocking…, three weeks ago my son in law also made $4172 workin a fourty hour month from their apartment and the’re neighbor’s step-sister`s neighbour was doing this for nine months and broght in over $4172 parttime at Their laptop. use the steps here, ….. WWW.BIT40,ℂOℳ

Allison. even though Laura`s storry is good… on tuesday I bought a brand new Lancia from having made $4403 this month and a little over $10,000 this past-month. it’s definitly the best job I have ever had. I started this six months/ago and straight away was bringing in more than $76 per/hr. I use this web-site, www.info34.com

It sickens me to even think the judge would grant these bonuses, after being unemployed for a year i finally got a job at hostess not knowing all that was going on, at the time i thought it was my life-saver. only been employed by hostess for 3 months im not even able to get unemployment. once again im desperate for a job, even only had been their for a short time my last 3 checks were smaller because of the give backs the drivers had given up hoping to help the plant stay open, as well as two years ago the drivers and bakers gave money to help the company . that money was supposed to be to update plants and equipment. but that money went right into the pockets of the ones who want a bonus. to the judge who decides if they get it, divide it up among the 18000 people these greedy top executives put out of work. signed in desperate need of a job.

If you don’t pay [the execs] to mange the liquidation they will leave. They have to make a living and that means getting paid for their time & trouble; one way or another. If you have a credible team that can do the job for less: bring them on.

BTW: if you’re not a Hostess shareholder, creditor, or prospective buyer of the assets is this your problem?

Lots of things are grating but try to think of it this way: if Forbes told you your job would be over in 1 (one) year but needed you to stay with them to the last day … what would you say? You know you need to find another job but you’re not a credible candidate for hire if you can’t show up for work [at the new firm] for months to come. Maybe there are other places you’d rather go RIGHT NOW but can’t if you accept Forbes’ proposition. There’s a risk you’ll get to spend time with ZERO income if you stick with Forbes to the last day. Or maybe you’d rather spend your time working for a place that has potential for growth instead of certainty for termination.

How would you like that? What would make it easier to accept such a proposal?

Thank you for this thoughtful comment. You articulate the argument for bonuses in a compelling way. I was in fact once in a situation where I was told my job would end in a year and you’re right, I didn’t wait for the year to be over before I left for another job. I would have needed an incentive to do that.